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7/28/2019 Summer Internship Project on SODEXO
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FINANCIAL MODELS- PAGE 1
FINANCIAL MODELS FOR
ALTERNATIVE SOURCES OF
ENERGY UNDER BETTERTOMORROW PLAN
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FINANCIAL MODELS- PAGE 2
SUMMER INTERNSHIP REPORT
ROHAN KARDILE
P1121
SYDENHAM INSTITUTE OF MANAGEMENT STUDIES, RESEARCH
AND ENTREPRENEURSHIP EDUCATION
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ACKNOWLEDGEMENT
I would like to take this opportunity to thank everyone who has been instrumental towards the
completion of this project.
I would like to thank my mentor from Sodexo, Mr. Ninad Chikhalikar head of QM & HSE.
Without his patient advice, guidance and encouragement, this project would not have been
possible. Also, I would like to thank Ms. Rupali, who has been extremely helpful.
I am also extremely grateful to all my colleagues at Sodexo Ltd for all their support, guidance
and assistance. This project would have been incomplete without their inputs.
I would also like to thank Dr. M.A. Khan and all the faculty of Sydenham Institute of
Management Studies, Research and Entrepreneurship Education (SIMSREE) for giving me the
opportunity to work on this project of Sodexo.
Last, but not the least, Id like to thank my family and friends for their continuous support and
also everyone else who has contributed directly or indirectly to the completion of this project.
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FINANCIAL MODELS- PAGE 4
ContentsOBJECTIVE ..................................................................................................................................................... 5
Executive Summary ....................................................................................................................................... 6
Introduction .................................................................................................................................................. 7
About BTP plan.......................................................................................................................................... 7
About MNRE.............................................................................................................................................. 7
About Renewable sources of energy ........................................................................................................ 9
Understanding the Requirement ................................................................................................................ 26
From SODEXO point of view ................................................................................................................... 26
About the Hospital sector ....................................................................................................................... 28
Governments supporting program ........................................................................................................ 30
Solar Water Heater ..................................................................................................................................... 33
FINANCIAL MODELS .................................................................................................................................... 43
Technical Specification ............................................................................................................................ 43
Supplier Details: ...................................................................................................................................... 43
Terms and conditions .............................................................................................................................. 44
Cost Details ............................................................................................................................................. 45
Means of Financing ................................................................................................................................. 46
How to calculate best financial model? ...................................................................................................... 54
Net Present Value ............................................................................................................................... 54
Calculations ................................................................................................................................................. 56
BEST MODEL................................................................................................................................................ 62
FUTURE PROJECTION USING THE BEST MODEL .......................................................................................... 63
CONCLUSION ............................................................................................................................................... 69
RECOMMENDATIONS ................................................................................................................................. 70
REFERENCES ................................................................................................................................................ 71
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FINANCIAL MODELS- PAGE 5
OBJECTIVE
As a part of SODEXO- QHSE team (Quality, Health, Safety and Environment), this project
will basically concentrate on non-conventional sources of energy to promote GO GREEN
motto. Hence this project will assist BTP (Better Tomorrow Plan) by performing the
following action
- To understand the requirement of the industry
- Identify the best alternative source of energy
- Design different financial models
- Choose the best financial model
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FINANCIAL MODELS- PAGE 6
Executive Summary
Protection of the Environment and Climate, and their preservation for the generations to come
is a demanding social, scientific and economical task. Utilization of renewable energy, efficientconversions of fossil fuel are not only environmentally and climatically beneficial, they also
preserve the finite energy sources. SODEXO has identified this gap and SODEXO will try to
bridge this gap by implementing BETTER TOMORROW PLAN, which also forms the base of this
project.
With an overall idea of improving energy efficiency, this project studies different Alternative
Sources of Energy, listed under MNRE that is, and MINISTRY OF NEW AND RENEWABLE
ENERGY. Project also identifies SOLAR WATER HEATER as the most feasible Alternative Sourceof Energy for SODEXO and its clients. To conclude sustainability, project proposes different
financial models supporting the use of Solar Water Heater. Selection of different financial
models depend upon some important parameters like Availability of fund, Future perspective,
Loans available, Life of Solar water Heater, Depreciation.
To incorporate detailed figures, specific example has to be taken. Here example of Hospital is
taken. Hospitals are one of the important clients for SODEXO. SODEXO has its own canteen in
Jogeshwari too. And as known, hot water is required by SODEXO canteen on daily basis too.Hence financial models stated at the end of this project can also be adapted by SODEXO in
order to go green by adapting SOLAR technology. Main form of energy required by Hospitals, to
obtain hot water is electricity or LPG. Solar water heater will allow hospitals to cut their cost in
electricity or LPG, thus making them financially and environmentally viable in long run.
This project will be subjected to Capital subsidy by MNRE (Ministry of New and Renewable
Energy) which is the nodal Ministry of the Government of India for all matters relating to new
and renewable energy.
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FINANCIAL MODELS- PAGE 7
Introduction
About BTP plan
Sodexo, world leader in Quality of Life solutions has announced the creation of the "BetterTomorrow Plan," designed to better respond to the challenges of proper Nutrition, Health and
Wellness, Local communities and Environment. The Plans objective is to take a new step by
consolidating Sodexos sustainability performance and measuring the impact of its actions.
The "Better Tomorrow Plan" comes from a long process of upstream work during which Sodexo
consulted experts and all of its stakeholders, both internal and external, over a twelve-month
period.
"This Plan includes three original elements," said Sodexos Damien Verdier, Group Chief
Marketing Officer. He added, "It formalizes our goals across our three focus areas (Nutrition,Health and Wellness; Local communities; Environment) with 14 specific commitments. In
addition, because we work every day directly on our clients sites, our approach is collaborative,
encompassing our own employees as well as our clients and suppliers in carrying out our
commitments. Finally, the Better Tomorrow Plan is a long term process, which provides tools
for measuring our progress and sets dates for progress assessments in 2012, 2015 and 2020.
Through this Plan, we are engaged in a process of continuous improvement that commits us,
and our stakeholders, to improve Quality of Life for present and future generations."
Pierre Bellon, Sodexos Chairman, founded the company in 1966, setting out the companys
beliefs, mission, values and ethical principles, which continue to serve as a unifying force for the
Groups 380,000 employees around the world today.
Sodexos mission, which has remained the same for 43 years, is two-fold: "To improve the
Quality of Daily Life for all those who we serve and to contribute to the economic, social and
environmental development of the cities, regions and countries in which we operate."
About MNRE
The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government of
India for all matters relating to new and renewable energy. The broad aim of the Ministry is to
develop and deploy new and renewable energy for supplementing the energy requirements of
the country. Creation CASE and Ministry:
Commission for Additional Sources of Energy (CASE) in 1981.
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FINANCIAL MODELS- PAGE 8
Department of Non-Conventional Energy Sources (DNES) in 1982.
Ministry of Non-Conventional Energy Sources (MNES) in 1992.
Ministry of Non-Conventional Energy Sources (MNES) renamed as Ministry of New and
Renewable Energy (MNRE) in 2006.
The role of new and renewable energy has been assuming increasing significance in recent
times with the growing concern for the country's energy security. Energy self-sufficiency was
identified as the major driver for new and renewable energy in the country in the wake of the
two oil shocks of the 1970s. The sudden increase in the price of oil, uncertainties associated
with its supply and the adverse impact on the balance of payments position led to the
establishment of the Commission for Additional Sources of Energy in the Department of Science
& Technology in March 1981. The Commission was charged with the responsibility of
formulating policies and their implementation, programs for development of new and
renewable energy apart from coordinating and intensifying R&D in the sector. In 1982, a new
department, i.e., Department of Non-conventional Energy Sources (DNES), that incorporated
CASE, was created in the then Ministry of Energy. In 1992, DNES became the Ministry of Non-
conventional Energy Sources. In October 2006, the Ministry was re-christened as the Ministry of
New and Renewable Energy.
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About Renewable sources of energy
Power plays a great role wherever man lives and works. The living standard and prosperity of a
nation vary directly with the increase in the use of power. The electricity requirement of the
world is increasing at an alarming rate due to industrial growth, increased and extensive use of
electrical gadgets.
According to world energy report, we get around 80% of our energy from conventional fossil
fuels like oil (36%), natural gas (21%) and coal (23%). It is well known that the time is not so far
when all these sources will be completely exhausted. Nuclear energy is a comparatively clean
source of energy. However, safe handling of nuclear energy reactor is a sophisticated task and
only around 7% of the worlds total energy requirement is being satisfied by it today.
As human needs know no bounds, today most of the nations worldwide have been passing
through a phase of power deficit. The crisis is more critical among the developing nations. In
India, energy demand is increasing at the rate of 9% per annum and supply is not keeping pace.
Present deficit of electrical energy is 8%.
The increased power demand, depleting fossil fuel resources and growing environmentalpollution have led the world to think seriously for other alternative sources of energy. Basic
concept of alternative energy relates to issues of sustainability, renewability and pollution
reduction. In reality alternative energy means anything other than deriving energy via fossil
fuel combustion.
Various forms of alternative energy sources are solar, wind, biogas/biomass, tidal, geothermal,
fuel cell, hydrogen energy, small hydropower etc.
Solution to long-term energy problem will come only through Research and Development in the
field of alternative energy sources.
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Many rural communities consume little electricity, and extending electricity grids to meet their
energy needs may prove more costly and take longer than harnessing new and alternative
sources of energy already available in these communities wind, solar, and biomass
through Renewable Energy Technologies (RETs). The attraction of these sources lies primarily in
their abundance and ready access. The RETs for exploiting these sources include biogas plants,
solar lanterns, solar home lighting systems, improved cook stoves, improved kerosene lanterns,
solar water pumping systems, solar water heating systems and water mills.
Solar energy panels are little costly considering our average economic standard. Studies
indicate that cooking with biogas (a highly combustible fuel comprising methane, carbon
dioxide, nitrogen, hydrogen and hydrogen sulphide produced through anaerobic fermentation
of organic matter) can be cheaper than cooking with any commercial fuel.
Let us study 4 major Alternative sources of energy
1. Hydro Power
2. Solar Energy
3. Wind Energy
4. Biomass energy
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1.Hydro Power
Let us first understand Indias general electricity consumption.
The hydroelectric power refers to the energy produced from water (rainfall flowing into rivers,
etc).Consequently, rainfall can be a good indicator to investors looking for a location to
implement or build a new hydroelectric power plant in India.
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It is, in fact, the case, if we compare the map of Annual Rainfall and the Energy Map of India,
that hydropower plants are situated in regions of the major rainfall. The dominant annual
rainfall is located on the north/eastern part of India: Arunachal Pradesh, Assam, Nagaland,
Manipur and Mizoram, and also on the west coast between Mumbai (Bombay) and Mahe.
It is important to understand how does it work? The following diagram and explanation will
throw some light on modern technology of Hydro power.
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The natural water cycle is driven directly by solar energy. When the sun heats up water in the
sea and surface water, vaporization takes place and the water rises in the form of water vapor.
The water vapor rises. When the water vapor reaches higher layers of air and is cooled down,
the water falls down in the form of rain, hail or snow. The water runs naturally towards the
lowest level and is transported on the earth surface in streams and rivers, and finally reaches
the sea where it again evaporates. By letting the water flow through turbines on its way to the
sea, we can harness the kinetic energy of the moving water to produce electricity.
Volume and head of water determine the potential energy of a waterfall. The head of water is
the height difference between reservoir intake and power station outlet. Water is directed into
pressure shafts leading down to a power station, where it strikes the turbine runner at high
pressure. The kinetic energy of the water is transmitted via the propeller shaft to a generator,
which converts it into electrical energy. Water power plants can be divided in two types based
on the pressure height: low- and high-head power plants.
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FINANCIAL MODELS- PAGE 14
Low-head power stations often utilize a large water volume but have a low head, as in a run-of-
river power station. Since regulating the flow of water is difficult, it is used when available. The
amount of electricity generated therefore increases considerably when the river is carrying
more water during the spring thaw or when precipitation is very high. The river is dammed up
by the power plant to lead the water into one or more turbines. After having been exploited inthe turbines, the water runs out in the river below the power station.
High-head power stations are generally constructed to utilize a high head but smaller volume of
water than run-of-river installations.
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2.Solar Energy
Solar energy, radiant light and heat from the sun, has been harnessed by humans since ancient
times using a range of ever-evolving technologies. Solar energy technologies include solar
heating, solar photovoltaic, solar thermal electricity and solar architecture, which can make
considerable contributions to solving some of the most urgent problems the world now faces.
Solar technologies are broadly characterized as either passive solar or active solar depending on
the way they capture, convert and distribute solar energy. Active solar techniques include the
use of photovoltaic panels and solar thermal collectors to harness the energy. Passive solar
techniques include orienting a building to the Sun, selecting materials with favorable thermalmass or light dispersing properties, and designing spaces that naturally circulate air.
In 2011, the International Energy Agency said that "the development of affordable,
inexhaustible and clean solar energy technologies will have huge longer-term benefits. It will
increase countries energy security through reliance on an indigenous, inexhaustible and mostly
import-independent resource, enhance sustainability, reduce pollution, lower the costs of
mitigating climate change, and keep fossil fuel prices lower than otherwise. These advantages
are global. Hence the additional costs of the incentives for early deployment should beconsidered learning investments; they must be wisely spent and need to be widely shared"
http://en.wikipedia.org/wiki/Lighthttp://en.wikipedia.org/wiki/Heathttp://en.wikipedia.org/wiki/Sunhttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Solar_photovoltaicshttp://en.wikipedia.org/wiki/Solar_thermal_electricityhttp://en.wikipedia.org/wiki/Solar_architecturehttp://en.wikipedia.org/wiki/Passive_solarhttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Solar_thermal_energyhttp://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Ventilation_(architecture)http://en.wikipedia.org/wiki/International_Energy_Agencyhttp://en.wikipedia.org/wiki/Sustainabilityhttp://en.wikipedia.org/wiki/Climate_changehttp://en.wikipedia.org/wiki/Fossil_fuelhttp://en.wikipedia.org/wiki/Fossil_fuelhttp://en.wikipedia.org/wiki/Climate_changehttp://en.wikipedia.org/wiki/Sustainabilityhttp://en.wikipedia.org/wiki/International_Energy_Agencyhttp://en.wikipedia.org/wiki/Ventilation_(architecture)http://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Thermal_masshttp://en.wikipedia.org/wiki/Solar_thermal_energyhttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Passive_solarhttp://en.wikipedia.org/wiki/Solar_architecturehttp://en.wikipedia.org/wiki/Solar_thermal_electricityhttp://en.wikipedia.org/wiki/Solar_photovoltaicshttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Solar_heatinghttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Ancient_historyhttp://en.wikipedia.org/wiki/Sunhttp://en.wikipedia.org/wiki/Heathttp://en.wikipedia.org/wiki/Light7/28/2019 Summer Internship Project on SODEXO
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Now lets understand few applications of solar energy
- Agriculture and horticulture
- Solar lighting
- Water heating
- Heating, cooling and ventilation
- Water treatment- Cooking
- Solar power
- Solar chemical
- Solar vehicles
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1. Agriculture and horticulture
While sunlight is generally considered a plentiful resource, the exceptions highlight the
importance of solar energy to agriculture. During the short growing seasons of the Little Ice
Age, French and English farmers employed fruit walls to maximize the collection of solar
energy. These walls acted as thermal masses and accelerated ripening by keeping plants warm.
Applications of solar energy in agriculture aside from growing crops include pumping water,
drying crops, brooding chicks and drying chicken manure. Greenhouses convert solar light to
heat, enabling year-round production and the growth (in enclosed environments) of specialty
crops and other plants not naturally suited to the local climate.
2. Solar Light
Hybrid solar lighting is an active solar method of providing interior illumination. HSL systemscollect sunlight using focusing mirrors that track the Sun and use optical fibers to transmit it
inside the building to supplement conventional lighting. In single-story applications these
systems are able to transmit 50% of the direct sunlight received. Solar lights that charge during
the day and light up at dusk are a common sight along walkways. Solar-charged lanterns have
become popular in developing countries where they provide a safer and cheaper alternative to
kerosene lamps.
3. Water heating
Solar hot water systems use sunlight to heat water. In low geographical latitudes (below
40 degrees) from 60 to 70% of the domestic hot water use with temperatures up to 60 C can
be provided by solar heating systems.The most common types of solar water heaters are
evacuated tube collectors (44%) and glazed flat plate collectors (34%) generally used for
domestic hot water; and unglazed plastic collectors (21%) used mainly to heat swimming pools.
4. Heating, cooling and ventilation
A solar chimney (or thermal chimney, in this context) is a passive solar ventilation
system composed of a vertical shaft connecting the interior and exterior of a building. As
the chimney warms, the air inside is heated causing anupdraftthat pulls air through the
building. Performance can be improved by using glazing and thermal mass materials.
http://en.wikipedia.org/wiki/Little_Ice_Agehttp://en.wikipedia.org/wiki/Little_Ice_Agehttp://en.wikipedia.org/wiki/Solar_power_in_the_United_Kingdomhttp://en.wikipedia.org/wiki/Greenhousehttp://en.wikipedia.org/wiki/Hybrid_solar_lightinghttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Solar_trackerhttp://en.wikipedia.org/wiki/Optical_fiberhttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Updrafthttp://en.wikipedia.org/wiki/Optical_fiberhttp://en.wikipedia.org/wiki/Solar_trackerhttp://en.wikipedia.org/wiki/Active_solarhttp://en.wikipedia.org/wiki/Hybrid_solar_lightinghttp://en.wikipedia.org/wiki/Greenhousehttp://en.wikipedia.org/wiki/Solar_power_in_the_United_Kingdomhttp://en.wikipedia.org/wiki/Little_Ice_Agehttp://en.wikipedia.org/wiki/Little_Ice_Age7/28/2019 Summer Internship Project on SODEXO
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A solar air conditioner uses a solar panel (not electricity) to super heat the refrigerant (the
hotter it is... the higher the energy saved) to deliver a super heated higher pressured gas to a
condenser and then to the evaporator and then to the Solar Compressor.
When the working fluid leaves the condenser, its temperature is colder and it has changed from
a gas to a 100% liquid under high pressure. By the time the working fluid leaves the evaporator,
it is a cool, low pressure gas. It then returns to the solar panel to begin its trip all over again
5. Water Treatment
Solar water disinfection (SODIS) involves exposing water-filled plastic polyethylene
terephthalate (PET) bottles to sunlight for several hours. Exposure times vary depending on
weather and climate from a minimum of six hours to two days during fully overcast
conditions. It is recommended by the World Health Organization as a viable method forhousehold water treatment and safe storage. Over two million people in developing countries
use this method for their daily drinking water.
Solar energy may be used in a water stabilization pond to treat waste water without chemicals
or electricity. A further environmental advantage is that algae grow in such ponds and
consume carbon dioxide in photosynthesis, although algae may produce toxic chemicals that
make the water unusable
6. Cooking
Solar cookers use sunlight for cooking, drying and pasteurization. They can be grouped into
three broad categories: box cookers, panel cookers and reflector cookers. The simplest solar
cooker is the box cooker first built by Horace de Saussure in 1767. A basic box cooker consists
of an insulated container with a transparent lid. It can be used effectively with partially overcast
skies and will typically reach temperatures of 90150 C. Panel cookers use a reflective panel to
direct sunlight onto an insulated container and reach temperatures comparable to box cookers.
Reflector cookers use various concentrating geometries (dish, trough, Fresnel mirrors) to focus
light on a cooking container. These cookers reach temperatures of 315 C and above but
require direct light to function properly and must be repositioned to track the Sun.
The solar bowl is a concentrating technology employed by the Solar Kitchenin Auroville, Pondicherry, India, where a stationary spherical reflector focuses light along a line
perpendicular to the sphere's interior surface, and a computer control system moves the
receiver to intersect this line. Steam is produced in the receiver at temperatures reaching
150 C and then used for process heat in the kitchen.
http://en.wikipedia.org/wiki/Disinfectionhttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/World_Health_Organizationhttp://en.wikipedia.org/wiki/Waste_waterhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Pasteurizationhttp://en.wikipedia.org/wiki/Horace_de_Saussurehttp://en.wikipedia.org/wiki/Solar_bowlhttp://en.wikipedia.org/wiki/Aurovillehttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Aurovillehttp://en.wikipedia.org/wiki/Solar_bowlhttp://en.wikipedia.org/wiki/Horace_de_Saussurehttp://en.wikipedia.org/wiki/Pasteurizationhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Waste_waterhttp://en.wikipedia.org/wiki/World_Health_Organizationhttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/Polyethylene_terephthalatehttp://en.wikipedia.org/wiki/Disinfection7/28/2019 Summer Internship Project on SODEXO
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7. Solar Power
Solar power is the conversion of sunlight into electricity, either directly using photovoltaic (PV), or
indirectly using concentrated solar power (CSP). CSP systems use lenses or mirrors and tracking systems
to focus a large area of sunlight into a small beam. PV converts light into electric current using
the photoelectric effect.
Following are the current PV technologies making their way in market
- Crystalline silicon (c-Si) modules represent 85-90% of the global annual market today. C-Si
modules are subdivided in two main categories: i) single crystalline (sc-Si) and ii) multi-
crystalline (mc-Si).
- Thin films currently account for 10% to 15% of global PV module sales. They are subdivided into
three main families: i) amorphous (a-Si) and micro morph silicon (a-Si/c-Si), ii) Cadmium-
Telluride (CdTe), and iii) Copper-Indium-Diselenide (CIS) and Copper-Indium-Gallium-Diselenide
(CIGS).
- Emerging technologies encompass advanced thin films and organic cells. The latter are about to
enter the market via niche applications.
- Concentrator technologies (CPV) use an optical concentrator system which focuses solar
radiation onto a small high-efficiency cell. CPV technology is currently being tested in pilot
applications.
- Novel PVconcepts aim at achieving ultra-high efficiency solar cells via advanced materials and
new conversion concepts and processes. They are currently the subject of basic research.
8. Solar Chemical
Solar chemical processes use solar energy to drive chemical reactions. These processes offset energy
that would otherwise come from a fossil fuel source and can also convert solar energy into storable and
transportable fuels. Solar induced chemical reactions can be divided into thermo chemical
or photochemical. A variety of fuels can be produced by artificial photosynthesis. The multi electron
catalytic chemistry involved in making carbon-based fuels (such as methanol) from reduction ofcarbon
dioxide is challenging; a feasible alternative is hydrogen production from protons, though use of wateras the source of electrons (as plants do) requires mastering the multi electron oxidation of two water
molecules to molecular oxygen. Some have envisaged working solar fuel plants in coastal metropolitan
areas by 2050- the splitting of sea water providing hydrogen to be run through adjacent fuel-cell electric
power plants and the pure water by-product going directly into the municipal water system.
http://en.wikipedia.org/wiki/Electricityhttp://en.wikipedia.org/wiki/Photovoltaicshttp://en.wikipedia.org/wiki/Concentrated_solar_powerhttp://en.wikipedia.org/wiki/Photoelectric_effecthttp://en.wikipedia.org/wiki/Photochemicalhttp://en.wikipedia.org/wiki/Artificial_photosynthesishttp://en.wikipedia.org/wiki/Methanolhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Hydrogenhttp://en.wikipedia.org/wiki/Hydrogenhttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Carbon_dioxidehttp://en.wikipedia.org/wiki/Methanolhttp://en.wikipedia.org/wiki/Artificial_photosynthesishttp://en.wikipedia.org/wiki/Photochemicalhttp://en.wikipedia.org/wiki/Photoelectric_effecthttp://en.wikipedia.org/wiki/Concentrated_solar_powerhttp://en.wikipedia.org/wiki/Photovoltaicshttp://en.wikipedia.org/wiki/Electricity7/28/2019 Summer Internship Project on SODEXO
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3.Wind EnergyIndia is surpassed only by Germany as one of the world's fastest growing markets for wind
energy. By the mid 1990s, the subcontinent was installing more wind generating capacity than
North America, Denmark, Britain, and the Netherlands.
The ten machines near Okha in the province of Gujarat were some of the first wind turbines
Installed in India. These 15-meter Vestas wind turbines overlook the Arabian Sea. In 2011, there
is an installed capacity of 6,430 MW; however, 7 times that potential or 46,092 MW exists.
Advantages
It is one of the most environment friendly, clean and safe energy resources.
It has the lowest gestation period as compared to conventional energy.
Equipment erection and commissioning involve only a few months.
There is no fuel consumption, hence low operating costs. Maintenance costs are low.
The capital cost is comparable with conventional power plants. For a wind farm, the capital cost
ranges between 4.5 crores to 5.5 crores, depending on the site and the wind electric generator
(WEG) selected for installation.
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Requirement for Wind Farm
An area where a number of wind electric generators are installed is known as a wind farm.
The essential requirements for establishment of a wind farm for optimal exploitation of the
wind are the following:
High wind resource at particular site.
Adequate land availability
Suitable terrain and good soil condition
Maintenance access to site
Suitable power grid nearby
Techno-economic selection of specific turbines
Scientifically prepared layout
Wind energy generation has limitations which will influence the extent and type of role itwill ultimately play in overall generation of electricity in India.
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Limitations
Wind machines must be located where strong, dependable winds are available most of
the time.
Because winds do not blow strongly enough to produce power all the time. Energy from
wind machines is considered "intermittent," that is, it comes and goes. Therefore,
electricity from wind farms must have a back-up supply from another source.
As wind power is "intermittent," utility companies can use it for only part of their total
energy needs.
Wind towers and turbine blades are subject to damage from high winds and lighting.
Rotating parts, which are located high off the ground can be difficult and expensive to
repair.
Electricity produced by wind power sometimes fluctuates in voltage and power factor,
which can cause difficulties in linking its power to a utility system.
The noise made by rotating wind machine blades can be annoying to nearby neighbors.
Some environmental groups have complained about aesthetics and avian mortality from
wind machines
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4.Biomass Energy
Biomass includes solid biomass (organic, non-fossil material of biological origins), biogas
(principally methane and carbon dioxide produced by anaerobic digestion of biomass and
combusted to produce heat and/or power), liquid biofuels (bio-based liquid fuel from biomass
transformation, mainly used in transportation applications), and municipal waste (wastes
produced by the residential, commercial and public services sectors and incinerated in specific
installations to produce heat and/or power).
The most successful forms of biomass are sugar cane bagasse in agriculture, pulp and paper
residues in forestry and manure in livestock residues. It is argued that biomass can directly
substitute fossil fuels, as more effective in decreasing atmospheric CO2 than carbon
sequestration in trees. The Kyoto Protocol encourages further use of biomass energy.
Biomass may be used in a number of ways to produce energy. The most common methods are:
Combustion
Gasification
Fermentation
Anaerobic digestion
India is very rich in biomass. It has a potential of 19,500 MW (3,500 MW from bagasse based
cogeneration and 16,000 MW from surplus biomass). Currently, India has 537 MW
commissioned and 536 MW under construction. The facts reinforce the idea of a commitment
by India to develop these resources of power production.
Following is a list of some States with most potential for biomass production:
Andhra Pradesh (200 MW)
Bihar (200 MW)
Gujarat (200 MW)
Karnataka (300 MW)
Maharashtra (1,000 MW)
Punjab (150 MW)
Tamil Nadu (350 MW)
Uttar Pradesh (1,000 MW)
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Understanding the Requirement
From SODEXO point of view
In India alone Sodexo employs 30,000 people, and serves 662,000 consumers every day.
Currently, Sodexo has a colossal portfolio of prestigious clients and we as a company are the
largest private purchaser of food on the Indian sub-continent. With this enormous reach we
want to be more conscious about improving the quality of food we serve thus ensuring a
sustainable future.
The importance of Food Safety in Sodexo India:
Demonstrates commitment of serving safe food
Reduces risk associated with food
Sodexo commit towards serving Safe Food to our Customers by rigorously implementing Food
Safety Practices through:
Use of Safe and Quality materials in food preparation
Evaluate and Partner with our suppliers to secure and maintain quality of delivered products
Maintain highest standards of hygiene and adherence to temperature norms for food
Continuously Train and educate our employees to achieve high food safety and hygiene
standards
Conduct periodic audits to ensure adherence to Food safety standards
Based on the above practices Sodexo have launched Food Safety policy that has been displayed
at all sites and it demonstrates Sodexos commitment towards serving safe food. Sodexo ensure
that non adherence to the Food Safety policy leads to reinforcing a zero tolerance policy. Failing
to non compliance of the zero tolerance policy would lead to disciplinary actions and
terminations of services for our employees.
Wateris not always considered to be strictly afoodin itself, but by its aid many foods andflavors
are put in forms more acceptable to the palate and more readily absorbed by the body than
they could be in any other way. In order to get clean water one can boil the water in order to
kill the impurities if any. Hence from point of Quality, it is advisable that one needs to heat the
water before it is used.
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The other important aspect of Food Safety is clean vegetables and fruit. Farmers use
insecticides, pesticides on them. Also these vegetables travel from farmer to middlemen, from
middlemen to wholesalers, from wholesalers to retailers and finally to buyers. During this long
journey there are chances that vegetables will fall on the unclean ground or catch dust. Hence
when buyers receive it, he or she should make sure that vegetables or fruits are cleaned beforeconsumption. As scientifically proven, hot water will be very useful in such cases.
At Sodexo Jogeshwari canteen, it will be really helpful if the hot water is available for
sanitization. This will make sure that Base of Food safety is achieved.
Apart from Food Services, Sodexo Globally has its expertise in Facility Management too. Facility
Management basically is divided into 2 parts which are Soft services and hard services.
Soft services are
Reception Cleaning
Pantry
Grounds keeping
Waste management
Vendor management
Hard services are
Electrical system
Energy efficiency system
Water treatment
Maintenance of Equipment
Under hard services, this project aims to improve Energy efficiency of clients. Hence
understanding the requirements play an important role. To scrutinize the understanding
specific example of Hospital sector has been taken.
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About the Hospital sector
The hospital sector is expanding in India to meet the medical needs of growing population.
According to BEE (Bureau of Energy efficiency) there were approximately 512000 beds in
private hospitals. This number is greater than that of public hospitals, which are 495000. In this
way total number of beds in India equals to approximately 10, 00,000.
In hospitals, heat stream is used in the form of steam and hot water. Steam is used in the
kitchens and for humidification in HVAC and sterilization process. In addition steam is used to
transport heat over longer distances. In many cases heat is transported from the heat
generating station in the form of steam and then converted locally into central heating or hot
tap water. Oil/Gas-fired boilers are used to generate steam and hot water.
The hot water requirement in hospitals, theoretically, stems from three purposes
Patient room
Laundry
Kitchen
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The laundry and kitchen are features of large corporate or public hospitals and these hospitals
contribute a tiny percentage of total hospital beds in India. The kitchen requirement is for
cleaning and works out less than 5 liters per bed. For practical purpose, patient room or bathing
constitutes the hot water requirement of hospitals. The arrangement, typically, is shower
and/or bucket bath. There are patients who, for medical reasons, are required to abstain frombathing. The care-takers accompanying the patient, in many instances, do not bathe in the
hospitals. These practices bring down the hot water consumption in a hospital.
The hospital owners/managers interviewed by us estimated hot water consumption per bed to
be 25 lpd/bed for patients who are permitted to bath. The growth of beds in government
hospitals is expected to be tardy- 2% per annum till 2022. We expect private hospital growth
@7% per annum till 2013 and to taper to 5% over 2014-17 period and 3% per annum
thereafter.
The total hot water requirement will escalate from 45.18 million lpd in 2011 to 75.11 million lpd
in 2022.
Let us understand the Hot water consumption in hospitals with the help of following chart.
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After understanding the requirement of hot water, means of financing it should be identified.
Project then identified MNREs efforts to promote the clean energy sources. The next section
will give the detailed view of MNREs JNN solar mission.
Governments supporting program
Jawaharlal Nehru National Solar Mission - Towards Building SOLAR INDIA
The National Solar Mission is a major initiative of the Government of India and StateGovernments to promote ecologically sustainable growth while addressing Indias energy
security challenge. It will also constitute a major contribution by India to the global effort to
meet the challenges of climate change
1. Objectives and Targets
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The objective of the National Solar Mission is to establish India as a global leader in solar
energy, by creating the policy conditions for its diffusion across the country as quickly as
possible. The Mission will adopt a 3-phase approach, spanning the remaining period of the 11th
Plan and first year of the 12th
Plan (up to 2012-13) as Phase 1, the remaining 4 years of the 12th
Plan (2013-17) as Phase 2 and the 13
th
Plan (2017-22) as Phase 3.
- To create an enabling policy framework for the deployment of 20,000 MW of solar
power by 2022.
- To ramp up capacity of grid-connected solar power generation to 1000 MW within
three years - by 2013; an additional 3000 MW by 2017 through the mandatory use of
the renewable purchase obligation by utilities backed with a preferential tariff
- To create favorable conditions for solar manufacturing capability, particularly solar
thermal for indigenous production and market leadership.
- To promote programs for off grid applications, reaching 1000 MW by 2017 and 2000
MW by 2022.
- To achieve 15 million sq. meters solar thermal collector area by 2017 and 20 million by
2022.
- To deploy 20 million solar lighting systems for rural areas by 2022.
2. The Proposed RoadmapThe aspiration is to ensure large-scale deployment of solar generated power for grid-connected
as well as distributed and decentralized off-grid provision of commercial energy services. Thedeployment across the application segments is envisaged as follows:
3. Mission strategy for Solar water heater
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The Mission in its first two phases will promote solar heating systems, which are already using
proven technology and are commercially viable. The Mission is setting an ambitious target for
ensuring that applications, domestic and industrial, below 80 C are solarised. The key strategy
of the Mission will be to make necessary policy changes to meet this objective:
- Firstly, make solar heaters mandatory, through building byelaws and incorporation
in the National Building Code
- Secondly, ensure the introduction of effective mechanisms for certification and rating of
manufacturers of solar thermal applications
- Thirdly, facilitate measurement and promotion of these individual devices through local
agencies and power utilities
- Fourthly, support the upgrading of technologies and manufacturing capacities through
soft loans, to achieve higher efficiencies and further cost reduction
4. Subsidies by MNREa) Capital SubsidyCapital subsidy equivalent to upfront interest subsidy Rs. 1850 per sq. m. to
registered institutions and Rs 1400 per sq. m. of collector area to registered commercial
establishments. For housing complexes Rs. 1900/ sq. m. of collector area
b) Interest Loan SubsidyIf solar water heater costs above 500,000 INR, then 80% of the costof the project will be provided loans for 5 years from IREDA/Banks at 2% for domestic users,3%
for institutional and 5% for commercial users. Banks too get an incentive of 1% of the loan.31
Banks are supporting the interest subsidies.
In this way, we understand that SOLAR WATER HEATERS will satisfy the growing needs of
hospitals. And since solar investment is encouraged by government, there will be monetary
incentives from the government as well. Apart from monetary incentives, hospitals will also
achieve environmental and social benefits.
After understanding the requirement of Solar Water Heater, there arises some important
financial decisions to satisfy the need of Solar Water heater. Hence this project will eventually
analyze and compare different financial decisions, followed by selecting the best model out of
them. The best model will project Cash flows, Profit and loss statement and balance sheet.
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Solar Water Heater
In order to acquire any asset, it is necessary to study the asset.
- Solar Water Heater is a device that helps in heating water by using the energy from the
SUN. This energy is totally free.
- Solar energy (sun rays) is used for heating water. Water is easily heated to a
temperature of 60-80o C.
- Solar Water Heaters (SWHs) of 100-300 liters capacity are suited for domestic use.
- Larger systems can be used in restaurants, canteens, guest houses, hotels, hospitals etc.
- A 100 liters capacity SWH can replace an electric geyser for residential use and may save
up to 1500 units of electricity annually.
- The use of 1000 SWHs of 100 liters capacity each can contribute to a peak load saving of
approximately 1 MW.
- A SWH of 100 liters capacity can prevent emission of 1.5 tonnes of carbon-dioxide per
year.
MAIN COMPONENTS OF SOLAR WATER HEATER
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Main components of Solar Water Heater are:
- Solar Collector( to collect solar energy)
- Insulated Tank (to store hot water)
- Supporting Stand
- Connecting Pipes and Instrumentation, etc.
WORKING OF A SOLAR WATER HEATER
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- The Suns rays fall on the Collector Panel (a component of Solar Water Heater). A blackabsorbing surface (absorber) inside the collectors absorbs solar radiation and transfers
the heat energy to water flowing through it. Heated water is collected in a tank which is
insulated to prevent heat loss. Circulation of water from the tank through the collectors
and back to the tank continues automatically due to thermo siphon principle.
- A Solar Water Heater consists of a Collector panel to collect solar energy and an
Insulated Storage Tank to store hot water.
TYPES OF SOLAR WATER HEATERS
Generally two types of Solar Water Heaters are available in the market.
- Flat Plate Collector based Solar Water Heater
This consists of flat plate collectors covered by an insulated metallic box with glass
sheet on the top to receive sun rays.
- Evacuated Tube Collector based Solar Water Heater
In this, the Collector is made up to double layer evacuated borosilicate glass tubeshaving selective coating on outer surfaces of inner tubes.
- Other Components
Rest of the components is same in both type of Solar Water Heater.
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FLAT PLATE COLLECTOR BASED SOLAR WATER HEATER
- In this system the solar radiation is absorbed by flat plate collectors which consist of an
insulated outer metallic box covered on the top with glass sheet. Inside it are blackened
metallic absorber (selectively coated) sheets with built in channels or riser tubes to carry
water. The absorber sheets absorb the solar radiation and transfer the heat to the
flowing water. The flowing hot water is then collected in the storage tank.
- These systems have long life (15-20 Years) and work efficiently especially in non-hillyregions and regions where water quality is good. For other regions Heat-exchangers are
required.
- These systems are available in multiple of 100 LPD (Liters per day) i.e. 100, 200, 300 LPD
etc.
- Bureau of Indian Standards has standardized the collectors for this type of Solar Water
Heaters. IS 12933: 2003 gives the details of these standards.
EVACUATED TUBE COLLECTOR BASED SOLAR WATER HEATER
In this system the collector is made of double layer borosilicate glass tubes evacuated for
providing insulation. The outer wall of the inner tube is coated with selective absorbing
material. This helps absorption of solar radiation and transfers the heat to the water which
flows through the inner tube. The flowing hot water is then collected in the storage tank.
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The features of Evacuated Tube Collector are as under:-
- These systems are less expensive and can work efficiently in hilly regions and also in regions
where water quality is not very good.
- The life of the system may, however, be less than that of FPC system as their collectors are
made of glass.
- These systems are available in any size e.g. 50, 75, 100, 125, 150 LPD etc. Presently thesesystems do not have BIS Standards, though they have approval of Ministry of New and
Renewable Energy, GOI.
DESIRABLE CHARACTERISTICS OF A HOT WATER STORAGE TANK
The Hot Water Storage Tank in Domestic Solar Water Heaters is a double walled tank. The
space between the inner and the outer tank is filled with insulation to prevent heat losses. The
inner tank is generally made of stainless steel to ensure long life. The outer tank could be made
of a stainless steel sheet, painted steel sheet or aluminum. Thermostat controlled electrical
heating elements can also be provided (optional) in the tank to take care of those days when
the sun does not shine or demand of water goes up. The capacity of the tank should be in
proportion to the collector area used in the system. A commonly used thumb rule is to provide
50 liters of storage for every one sq. m. of collector area.
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FEATURES OF A GOOD SOLAR WATER HEATER
First and foremost requirement of a good Solar Water Heater is that it should have sufficient
collector area for the capacity claimed. The collector area used in the system determines thecapacity of water heating. For example, in typical North Indian weather conditions, on a sunny
winter day, one sq. m. of flat plate collector area can be expected to heat approximately 50
liters of water by a temperature of 30-40 C. Typical flat plate collectors made in the country
have an area of around 2 sq. m and are thus capable of heating around 100 liters of water in a
day. An ETC based system of 14 tubes covering an area of 1.5 Sq. m. is able to provide 100 Liters
of hot water in a day. This proportion serves as a benchmark. Further, the collectors should be
of good material and the absorbers should carry good quality coating (BIS approved collectors
are being provided by large number of established manufacturers). The system should be
mounted on a rigid structure and should be firmly fixed with the roof to prevent damage duringhigh winds.
ESTIMATED REQUIREMENTS OF HOT WATER
Some important thumb rules are:
COST OF A SOLAR WATER HEATER
As per guidelines of Ministry of New and Renewable Energy (MNRE), GOI the upper cost limits
for Solar Water heaters are detailed below:
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SITE REQUIREMENTS FOR INSTALLATION OF SWH
The basic requirement of site for installation of a Solar Water Heater depends on the following
factors:-
- For functioning of a Solar Water Heater the most important thing is the availability of
unobstructed sunlight for the whole day. Typically, domestic Solar Water Heating
Systems are installed on the roof of the house. The Collectors of the system have to face
the sun and hence should be oriented towards the North-South axis for maximum
interception of sunlight. Thus there should be no obstruction to sunlight in any
directions (an arc of about 60 with the ground should ideally be shadow free).
- As a thumb rule, the requirement of shadow free area is around 3 sq. m for each 1 x 2 m
Collector used. As far as possible, the area should be flat, away from rain water drainsand close to the bathrooms where hot water is to be supplied.
- Cold water should be available at a height of around 2.5 m from the base of the system.
WORKING OF SOLAR WATER HEATER ON CLOUDY DAYS
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The heating of water by the solar system will obviously be affected. If it is so cloudy that energy
received from the sun is almost zero, the output of solar collectors also will be nil. On partially
cloudy days some output can be expected. But, the system can be designed with a suitable
electrical back up heater to take care of hot water demand on cloudy days.
LIFE SPAN OF SOLAR WATER HEATER
Typical Solar Water Heaters made by using materials as per BIS specifications could last for 15 -
20 years depending upon the general upkeep, maintenance.
SUPPLIERS OF DOMESTIC SOLAR WATER HEATERS
There are 56 BIS approved Manufacturers of FPC based Solar Water Heaters and 23 MNRE
approved suppliers of ETC based Solar Water Heaters. The list of these manufacturers is
available on MNRE website (www.mnes.nic.in).
Some of the providers are:
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OPERATIONAL REQUIREMENTS
Domestic solar systems do not require any special operational skills. However, if the following
tips are observed, the efficiency of the systems will be maintained at a high level:
- Try to consume most of the heated water at one time -either in the morning or in the
evening. Frequent ON and OFF of the hot water tap would lead to reduced
electricity savings.
- If an electrical back-up is provided in the tank, set the thermostat at the lowest
acceptable temperature.
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- In the North Indian climate, hot water may not be used for bathing in summers. If the
system is to be put totally out of use, it should be drained of water and the collector
should be covered. Alternatively, if the hot water requirement remains in summers also,
though at a reduced level, cover the collector partially.
- Dust deposition on the collector would reduce its efficiency. Try to get it cleaned at leastonce in a week.
MAINTENANCE REQUIREMENTS
Domestic Solar Water Heater does not need significant maintenance. Occasional leakages in
plumbing could be easily repaired by common plumbers. In case quality of water is hard, scale
deposition in the collectors may result over the years. This may require treatment with acids forwhich it is best to contact the suppliers. Broken glass may also have to be replaced by the
suppliers.
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FINANCIAL MODELS
Let us consider a hospital whose daily need of hot water is 1000 Liters per day. Hospital is
situated in non hilly region like Mumbai, where there is no hard water. For such water Flat Plate
Collector SWH should be used.
Technical Specification
Particular Detail
Name of the equipment Solar water Heater
Company name Tata BP solar
Model Name VAJRA
Capacity 1000 Liters per day
Input temperature of water 25 degree Celsius
Output temperature of water 60 degree Celsius
Cost 173000
Subsidy available 1890/- per square meter
Size of SWH 22.75 Sq meterTotal subsidy 43000/-
Net cost 130000/-
VAJRA 1000 LPD Non-Press, Non- HHC, Thermosyphon type Solar Water Heating system @
60 deg. C consisting of:
1 nos. x 1000 liters insulated SS304 hot water storage tanks
8 nos. of TBP make solar flat plate collectors
Mounting stand for tanks & collectors
Supplier Details:
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Terms and conditions
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Cost Details
Cost of equipment
The total cost of equipment and machinery is estimated ` 1.55 lakh, the total cost includes for
solar collectors, insulated hot water tanks of SS make, mounting stands for hot water tank &collectors besides the installation & commissioning cost.
Other costs
Other cost includes erection & commissioning cost which is 0.03 lakh and Construction cost
which is 0.15 lakh. The total cost of implementation of the SWHS is estimated at 1.73 lakh.
Sr No Details Cost in Lakh
1 Equipment and machinery 1.552 Erection & Commissioning 0.15
3 Contingency cost 3
4 Total 1.73
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Means of Financing
When it comes to financing the equipment, following are the options that can be executed
1. One time cash payment from pocket
2. Loan
3. Lease
1. One time cash paymentOnetime cash payment is simple to understand. If buyer has enough funds or cash in hand,
buyer can pay instantly at the deal. This is very efficient as compared to loan. When loan is
taken bank makes sure that profit is earned. That profit margin has to bear by buyer.
2. LoanWhen buyer does not have enough money, buyer can seek the help of banks or lenders. Lender
will lend the money at some interest rate. This Loan can be secured or unsecured.
In secured loan some asset is used as pledge in the deal. When buyer is unable to pay back,
lender will get ownership of underlying asset. For example, if bank has given a loan of 30 lakh
with pledge worth 50 lakh. If borrower is unable to pay, bank will sell the pledge for 50 lakh.
Bank will keep its 30 lakh and remaining 20 lakh will be given back to borrower.
In unsecured loan there is nothing as pledge. Hence lender carries extra risk. To cover for this risk,
lender usually levies extra interest rate.
Usually calculation of interest is confusing. In order to understand, let us study different methods of
computation existing in this market.
The add-on method The discount method
The remaining balance method
Add-on Method
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Under the add-on method, the lender calculates the total interest charge by multiplying the
entire loan amount by the contractual interest rate, and then multiplying the total interest
cost by the period (months, years) covered by the loan. The interest charge is added to the
principal to determine the total amount to be repaid. This amount is then divided by the
number of repayment periods to determine each payment. The total interest charge is thus:
I = A x i x N Where:
I=total interest charge over the life of the loan
A =amount of loan
I = contractual interest rate per time period
N=number of periods covered by the loan
The periodic payment is: B = (A + I) / N
Where
B=total payment
n =repayment periods under consideration
For an example of add-on interest, assume a $3,000 loan to be repaid in two annual
installments. The annual contractual interest rate is 6 percent. Then, the total interest charge is:
I = $3,000 x .06 x 2 = $360 and the annual payments will be:
B = ($3,000 + 360) / 2 = $1,680
Discount Method
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The discount method calculates total interest the same way as the add-on method, with one
exception. The interest is subtracted from the loan amount and the borrower receives the
balance. The total interest charge is:
I = A x i x N
The amount the borrower receives is:
L = A I
Where:
L=loan proceeds
And the periodic payment is: B = A / N
Using the same data as before ($3,000 loan amount, 6 percent annual interest rate, over 2years), the total interest charge is again $360: I = $3,000 x .06 x 2 = $360
The borrower would receive $2,640:
L = $3,000 - $360 = $2,640
And would repay two installments of $1,500 each: B = $3,000 / 2 = $1,500
Remaining Balance method
When the remaining balance method is used, the interest charge is computed in each period by
multiplying the contractual interest rate by the principal balance remaining at the beginning of
the period (the unpaid balance). The major difference between this method and the previous
two, beyond the complexity of the mathematical calculations, is that interest is not charged on
principal that has been repaid.
The total interest charge, the periodic interest payment, and the periodic principal payment all
depend on the method selected for repayment. Two methods are commonly used: the equal
total payment plan (Standard plan) and the equal total principal plan (Springfield plan). To
illustrate interest computation for these two repayment methods, assume a $10,000 loan at a
12 percent annual contractual rate to be repaid in eight annual payments.
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There are 2 types of remaining balance method
- Equal total payment method
- Equal principal payment method
Equal Total Payments - Under the equal total payment method, the annual payment for thisloan is $2,013.03 for each of the 8 years. This was determined by multiplying the amortization
factor (see Table 3) for 12 percent interest and 8 year payment period times the loan amount.
The portion of each payment that is interest and the portion that is principal will vary with each
payment. At the end of the first year, interest is charged on the full $10,000 principal
outstanding:
I1 = $10,000 x 0.12 = $1,200
Thus, the principal payment is the difference: C = $2,013.00 - $1,200 = $813.00
Where:
C=the principal payment
The remaining principal balance after the first payment is: R = $10,000 - $813.00 = $9,187.00
Where:
R=the principal balance
Interest in the second year is charged on the remaining balance: I2 = $9,187.00 x 0.12 =
$1,102.44
And hence principal payment is:
C2 = $2,013 - $1,102.44 = $910.59
And
R2 = $9,187.00 - $910.59 = $8,276.41
A similar set of steps is followed each year thereafter.
Equal Principal Payments - Under the equal principal payment plan, interest charges are
calculated in a similar manner. The primary difference is that equal principal payments are
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made. In addition, the annual total repayments will decline each year due to a declining
principal balance upon which interest is calculated.
I1 = $10,000 x 0.12 = $1,200
But, the principal payment is:
C1 = $10,000 / 8 = $1,250
Thus, the total payment for the first year is: B1 = $1,250 + $1,200 = $2,450
And the remaining principal balance is:
R1 = $10,000 - $1,250 = $8,750
In the second year:
I2 = $8,750 x 0.12 = $1,050
C2 = $1,250
B2 = $1,250 + $1,050 = $2,300
R2 = $8,750 - $1,250 = $7,500
3. Leasing
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How to calculate best financial model?
Different models stated above will have different payment structures and different payment
periods. In this situation one cannot just sum up the total cash outflows to compare. Because as
the years passes value of money changes because of various factors like inflation, global trends.
Hence we need to first evaluate all the possible cash outflows and inflows. We need to then
discount the cash flows to get present value of these cash flows. This concept is called as NPV
(net present value). Whichever model has minimal of cash outflows will be best suited model.
Let us see how NPV works:
Net Present Value
In finance, the net present value (NPV) or net present worth (NPW)[1]
of a time series ofcash
flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the
individual cash flows of the same entity.
In the case when all future cash flows are incoming (such as coupons and principal of a bond)and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows
minus the purchase price (which is its own PV). NPV is a central tool in discounted cash
flow (DCF) analysis, and is a standard method for using the time value of money to appraise
long-term projects. Used for capital budgeting, and widely used throughout economics, finance,
and accounting, it measures the excess or shortfall of cash flows, in present value terms, once
financing charges are met.
NPV can be described as the Difference Amount between the sums of discounted; cash
inflows and cash outflows. It compares the present value of money today to the present value
of money in future, taking inflation and returns into account
The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or
discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of
cash flows and a price as input and inferring as output a discount rate (the discount rate which
would yield the given price as NPV) - is called the yield, and is more widely used in bond
trading.
http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Time_serieshttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Present_valuehttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Time_value_of_moneyhttp://en.wikipedia.org/wiki/Capital_budgetinghttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Yield_(finance)http://en.wikipedia.org/wiki/Yield_(finance)http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Capital_budgetinghttp://en.wikipedia.org/wiki/Time_value_of_moneyhttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Discounted_cash_flowhttp://en.wikipedia.org/wiki/Present_valuehttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Time_serieshttp://en.wikipedia.org/wiki/Net_present_value#cite_note-netpresworth-0http://en.wikipedia.org/wiki/Finance7/28/2019 Summer Internship Project on SODEXO
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Formula
Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed.
Therefore NPV is the sum of all terms,
Where
t- The time of the cash flow
i- The discount rate (the rate of return that could be earned on an investment in the financial
markets with similar risk.); the opportunity cost of capital
- The net cash flow (the amount of cash, inflow minus outflow) at time t. For educational
purposes, is commonly placed to the left of the sum to emphasize its role as (minus) the
investment.
The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial
Cash outlay the present value but in case where the cash flows are not equal in amount then
the previous formula will be used to determine the present value of each cash flow separately.
Any cash flow within 12 months will not be discounted for NPV purpose.[2]
Given the (period, cash flow) pairs ( , ) where is a positive integer and the total number ofperiods , the net present value is given by:
http://en.wikipedia.org/wiki/Discountedhttp://en.wikipedia.org/wiki/Discount_ratehttp://en.wikipedia.org/wiki/Rate_of_returnhttp://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Net_present_value#cite_note-1http://en.wikipedia.org/wiki/Rate_of_returnhttp://en.wikipedia.org/wiki/Discount_ratehttp://en.wikipedia.org/wiki/Discounted7/28/2019 Summer Internship Project on SODEXO
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Calculations
Now let us apply the NPV formula and find out the best mean of financing.
1. LOAN
- As stated earlier 43,000 INR capital subsidy will be available for SWH.
- Bank can give loan of 130000 INR. IREDA will help regarding the loan.
- Loan tenure will be of 6 years. Interest rate will be 10%.
- Repayment scheme used by IREDA for promotion of SWH is The remaining balance
method.- IREDA has decided how Principal amount should be paid.
- Since SWH will be displayed on balance sheet of hospital, we should consider
depreciation. Accelerated 80% depreciation is applicable. Depreciation is just a notional
amount. Hence depreciation will not be considered in cash flows. But Depreciation is
deducted as expense. Hence tax saving availed because of depreciation should be
considered as cash inflow.
- Tax rate applicable is 30%.
- Interest paid is deducted as expense. But principal amount paid is not deducted as
expense.- Factor column below represents 1/ (1 + i) ^t. Where i : discount rate, t: year
Let us understand how Loan repayment works for SWH. In following table principal payment is
as directed by IREDA. Amount given below is expressed in lakh.
Table 1.1 Loan repayment
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Now let us calculate Depreciation.
Table 1.2 Depreciation
- Since we know Interest (not principal payment) and depreciation carry advantage of tax,
we should add the interest saved as cash inflows. For example, if a firm is paying 100
INR as interest, then firm will save 30% tax that is 30 INR. Hence total payment made by
that firm is 70 INR.
- These payments will be done over a course of few years. Hence we will need to
calculate present values in order to compare with other financial models. Factor below
represent, the value of 1 INR today with respect to that particular year.
Table 1.3 PRESENT VALUE OF DEPRECIATION TAX SHIELD
Table 1.4 PRESENT VALUE OF INTEREST TAX SHIELD
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Table 1.5 PRESENT VALUE OF LOAN PAID
Table 1.6 PRESENT VALUE OF RESALE VALUE
PRESENT VALUE OF CASH OUTFLOW
= PV of LOAN PAID (PV of DEPRECIATION SHIELD + PV of INTEREST SHIELD + PV of RESALE)
= 41760.82
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2. LEASE
- Lease amount can be deducted as expense
- Hence there will be tax benefit that can be availed on it.- Most of the times, asset is not shown on the books of lessee. Hence no depreciation tax
shield is available.
- Lease is taken when you do not have enough funds or you need SWH for limited period.
A) FINANCIAL LEASE
Table 2.1 PRESENT VALUE OF LEASE RENTAL- EQUAL ANNUAL PLAN
Table 2.2 PRESENT VALUE OF LEASE RENTAL- DEFERRED PAYMENT PLAN
Table 2.3 PRESENT VALUE OF LEASE RENTAL- STEPPED UP PLAN
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B) OPERATING LEASE
- Now suppose hospital has requirement of SWH for a limited period then it would go for
Operating lease.
- In operating lease, lessee can withdraw from lease agreement at any time. Hence
advantage lies with lessee.
- When lessor gives advantage to lessee, lessor charges extra rent.
Table 2.4 PRESENT VALUE OF LEASE RENTAL- OPERATING LEASE
C) SALES AND LEASE BACK
Suppose hospital has two important expenditures ahead, but can afford only one of the
expenditures, then hospital should go ahead with the Sales and lease back.
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Here Hospital buys SWH for 1.73 lakh and sells it to XYZ ltd for 1.88 lakh. But at the
same time it leases back the SWH from XYZ ltd, with annual rent of 17000 for 8 years.
Hence in the 0th year hospital has cash inflows of 15000 INR
Table 2.4 PRESENT VALUE OF LEASE RENTAL- OPERATING LEASE
Net present value
= PV of lease - Gain during the transaction at zero year
= 63485.62 - 15000
= 48485.62
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BEST MODEL
- 6 models have been stated above.
- In the financial lease models, it is possible for lessee to buy the SWH at the end of 8th
year. It depends upon the contract. Generally the resale value is more than the fees of
transfer of asset at the end lease. Hence our assumption is asset is not transferred at
the end of 8th
year to lessee.
- To find out which is the best model we only need to compare the Present Value of cash
outflow. The one with minimum cash outflow is the model that suits the need.
- As the table indicates, LOAN remaining balance method is the best model to finance
the solar water heater. The main reasons behind it are
IREDA promoting the use of Solar Water Heater
Accelerated depreciation available
- But if by any chance loan is not available and funds are not enough, one can always go
for Sale and lease back method.
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FUTURE PROJECTION USING THE BEST
MODEL
To understand the future projections, prediction of savings or revenues is must. Hence first let
us try to understand what can be the future revenues.
- Most of the hospitals these days use Diesel boiler in order to heat the water. Load
shedding has been the main reason behind it.
- According to Bureau of Energy Efficiency 6.5 liters of diesel is needed to heat 1000 liters
of water.
- At the same time hospital will not be able to claim the benefits of depreciation. The cost
of machine is 160000, with depreciation of 10%. Hence 16000 is yearly depreciation.
The tax saved is 30% of depreciation. Thus the total benefit is 4800. Hospital will miss
this benefit once they switch to SWH. Cost of machines varies from 160000 to 170000.
Hence for calculation purpose let us take the depreciation advantage as 5000.
- Other details are shown in the following chart. Following is the minimum revenue
generated using SWH, since we have not taken into consideration Loan amount, if any.
Table 5.1: Revenue prediction
- To demonstrate how solar water heater is beneficial in future, frame of 8 years is taken.
During these 8 years we project the following:
Profit and loss statement
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Balance Sheet
Cash flow
- Above financial statements will help to evaluate important parameters like IRR (internal
rate of return), NPV (Net present value) and ROI (Return on investment). Hence we will
be able to evaluate overall project.
Table 5.2 LOAN CALCULATION
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Table 5.3 PROFIT & LOSS STATEMENT
TABLE 5.4 TAX COMPUTATIONS
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TABLE 5.5 BALANCE SHEETS
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TABLE 5.6 CASH FLOW STATEMENTS
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TABLE 5.7 IRR and NPV
TABLE 5.8 ROI
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CONCLUSION
- Since Net Present value (275000) is greater than cost of equipment (130000), we can
conclude that Solar water heater is financially viable solution.
- Similarly IRR (51%) is also greater than the cost of capital (10%), hence confirming the
financially robust solution.
- Solar water heater proposed here has back-up heating ability to compensate for the
days where solar energy is not sufficient. Hence this modern solar water heater proves
efficient in performance.
- Environmentally it saves 15 tonnes of carbon dioxide. Following is the summary of fuel
savings due to the use of solar water heater 1000 liters.
-
Considering the financial and environmental factors it has been proved that SOLAR WATER
HEATERis profitable in the long run and can very well serve the purpose of BETTER
TOMORROW PLAN ofSODEXO.
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RECOMMENDATIONS
Wipro ltd has established the great example paper recycling plant. It can be followed by others
to save the environment.
Aim of Paper recycling
- To handle paper waste efficiently and to avoid data security issues
- To recycle the paper within the campus
Plant specification
- Let us take the example of a plant capable of 200 KG/ day. It will need 400 sq feet. And
on average would recycle 4800 kg of papers.
- It consists of
Paper crusher motor
Recycle water pump
Paper slurry shifting pump
Hydraulic press pump
- The plant consumes 12.5 units of electricity and 600 liters of water per day.
Cost benefits
- Average Pulp generated per day: 420 kg
- Cost of pulp : 2.25 per kg
- Revenue per day : 945 INR
- Savings per day : 529 INR
- Savings per annum : 165048 INR
Environmental Benefits
- Conservation of natural resources
- Emission reduction
- Water pollution control
- Waste disposal
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REFERENCES
- MNRE site: www.mnre.gov.in
- Bureau of Energy Efficiency site:http://www.beeindia.in/
- Financial management by Prasanna Chandra
- Environment Best practices by R.K. Narang
- ICON hospital
- Delhi energy efficiency & renewable energy management center
http://www.beeindia.in/http://www.beeindia.in/http://www.beeindia.in/http://www.beeindia.in/Recommended